The Two Types of Funded Startups that will Survive, or Crash in Our New Economy

We’ve survived the apocolypse and the fiscal cliff, but many still wonder what this new economy means for investments in the tech sector. Venture capitalism is one of our founder’s favorite topics, so if there’s a camera and a microphone around, SiliconAngle CEO John Furrier could talk about investments all day. He made an appearance on Newsdesk this morning to discuss the latest in tech.

After mentioning the circumstances that led up to Aaron Swartz’s suicide, Furrier addresses recent reports that the volatility of the start-up scene in 2012 has taken its toll on venture capitalist interest and the technology market as a whole.

Furrier agrees with these reports, and says that the problem is what he calls “middle class” startups – companies that should not have received funding from the get go. These companies are often referred to as durable startups: firms that have turned in a profit and rely on a solid cash flow to gain market share, albeit slowly. Furrier explains that these ventures represent a good business opportunity, but not for VCs that are seeking a big return on their investment.

He goes on to define a second category of startups: those that have raised funding and can afford to expand at a loss. This allows these companies to gain market share a lot faster than their profitable counterparts, making them worthwhile of investors’ attention.

After wrapping up the subject, Furrier makes a prediction of his own: he believes that there is another bubble as a result of this misplaced VC interest, and it is poised to burst in the near future. He predicts that the top social networks will manage to solider in spite of the plunge, and he expects enterprise markets to see increased growth in the same timeframe.

Furrier brings up the recent executive changes at EMC Ventures, which he considers to be a key player in the Silicon Valley financing space. Managing Director Shawn Douglass recently stepped down to assume the role of CTO at ServiceMesh, an emerging DevOps startup.

The final topic that Furrier tackles is a recent statement by Yammer founder David Sacks, who declared that Silicon Valley of no longer ripe for innovation. He explains why this is not the case. See why in the video below:

Maria Deutscher is a staff writer for SiliconANGLE covering all things enterprise and fresh. Her work takes her from the bowels of the corporate network up to the great free ranges of the open-source ecosystem and back on a daily basis, with the occasional pit stop in the world of end-users. She is especially passionate about cloud computing and data analytics, although she also has a soft spot for stories that diverge from the beaten track to provide a more unique perspective on the complexities of the industry.

1 Comment

pbookman
on January 17, 2013 at 4:35 pm

furrier I’m curious what your definition of growth is exponential wise for “middle class” start-ups? Is there the other side as well where growth is fast, but like a fire with gasoline, unsustainable at a certain point regardless of growth?

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furrier I’m curious what your definition of growth is exponential wise for “middle class” start-ups? Is there the other side as well where growth is fast, but like a fire with gasoline, unsustainable at a certain point regardless of growth?